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October 23, 2020
The emerging post-pandemic challenges are driving entrepreneurs to rebuild or reimagine their business’ processes, which will influence next year's budgets significantly. Entrepreneurs are working hard to create 2021 budgets right now, and are aiming to include plans for everything from marketing to staffing and beyond.
A budget is essentially a business’ financial plan that sets out its projected income and expenditures over a given period. Budgeting allows you to allocate your business funds or monthly income for the next year’s investments and expenses. CFOs can help you create a realistic budget by evaluating your current processes and identifying inefficiencies.
The pandemic has affected different industries and businesses in a wide variety of ways. Businesses’ ability to respond to COVID-19’s challenges will be a big factor in their strategies to maintain profitability in 2021. Entrepreneurs creating a budget for 2021 should consider the following best practices to improve customer satisfaction while still controlling costs.
Before creating your budget, you must first set your business goals. Then identify your priorities, such as driving more revenue, acquiring customers or increasing brand awareness. These goals may be short term, midterm or long term. Next, establish strategies and allocate funds to accomplish those goals.
A long-term financial plan can help you identify your business' capital needs and operational goals over time. In this time of uncertainty, a long-term financial plan can also help you to determine sustainable actions for growth.
You can cut the budget for non-revenue expenses and recurring expenses to free up your cash. Analyzing every single cost matters so that your total expenditures do not exceed your revenue. Your expense plan for 2021 should include:
Understand your company’s current financial situation and how to improve it in the next few months before planning your cash flow. Monitor your current balance sheet and cash flow to identify the leading indicators that may suggest actions to help you improve your cash flow. These leading indicators may include:
Most businesses don’t have a sufficient budget to invest in all aspects of digital marketing. They can find the most effective marketing activities by analyzing all previous marketing results that can generate the best ROI.
You should develop a strategy to optimize your spending and resources to reach your marketing goals. In addition, allocate a budget for retargeting activities to market to existing clients for repeat purchases.
COVID-19 has accelerated trends like remote work and digital transformation, forcing IT leaders to adapt their budgets accordingly. Prioritizing your goals is necessary so that when you get funding, you can invest it in long-term growth. CFOs should consider investments in three broad areas during their budget planning sessions:
Budgeting priorities for 2021 are different for each organization based on their unique circumstances. Scenario planning can guide you, demonstrating how you should approach budgeting and forecasting for the coming year. It helps you prepare for worst-case, expected, and best-case scenarios. Predict and prepare for a wide range of possibilities that your business may face through 2021.
Prepare a flexible budget in a way that will help you maximize your profit in 2021. The businesses that quickly adapt to changes in the marketplace often have an effective strategy for risk management. Prepare a budget and adjust it as market conditions change. Companies need to regularly review and update their budgets and forecasts according to the new government policies. This can help businesses stay one step ahead of competitors.
Forecasting involves projecting the finances of a business, such as income, expenses, cash flow or balance sheets, based on current conditions. Your forecast is based on key drivers of business performance or profitability specific to the business. Entrepreneurs must prepare a robust contingency plan to deal with possible financial challenges.
Outsourcing can provide you with the flexibility to scale up or down any time during the year. By outsourcing such functions as HR, payroll, accounting, finance, tech services and recruiting, you only have to pay for the services you use. Thus, you can control costs and save money while spurring growth.
Outsourcing some of the day-to-day functions that your business has in place could save you a significant amount of money. With outsourcing, you can also save time and money spent on hiring, training and retaining top talent, leaving more funds available for your cash flow needs.
Tasnim Ahmed is a content writer at Escalon Business Services who enjoys writing on a multitude of subjects that include finops, peopleops, risk management, entrepreneurship, VC and startup culture. Based in Delhi NCR, she previously contributed to ANI, Qatar Tribune, Marhaba, Havas Worldwide, and curated content for top-notch brands in the PR sphere. On weekends, she loves to explore the city on a motorcycle and binge watch new OTT releases with a plateful of piping hot dumplings!
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